FOMC Minutes

Meeting of Federal Open Market Committee

July 18, 1967

MINUTES OF ACTIONS

A meeting of the Federal Open Market Committee was held in

the offices of the Board of Governors of the Federal Reserve System

in Washington, D. C.,

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

on Tuesday, July 18, 1967, at 9:30 a.m.

Hayes, Vice Chairman, presiding

Brimmer

Maisel

Mitchell

Robertson

Scanlon

Sherrill

Swan

Wayne

Patterson, Alternate for Mr. Francis

Messrs. Ellis, Hickman, and Galusha, Alternate

Members of the Federal Open Market Committee

Messrs. Bopp, Clay, and Irons, Presidents of

the Federal Reserve Banks of Philadelphia,

Kansas City, and Dallas, respectively

Mr. Holland, Secretary

Mr. Sherman, Assistant Secretary

Mr. Kenyon, Assistant Secretary

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Messrs. Baughman, Craven, Garvy, Hersey,

Jones, Koch, Partee, and Ratchford,

Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

Mr. Cardon, Legislative Counsel, Board of

Governors

Mr. Fauver, Assistant to the Board of Governors

7/18/67

Mr. Williams, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Axilrod, Associate Adviser, Division of

Research and Statistics, Board of

Governors

Mr. Bernard, Economist, Government Finance

Section, Division of Research and

Statistics, Board of Governors

Miss Eaton, General Assistant, Office of the

Secretary, Board of Governors

Miss McWhirter, Analyst, Office of the

Secretary, Board of Governors

Mr. Lewis, First Vice President, Federal Reserve

Bank of St. Louis

Messrs. Eisenmenger, Eastburn, Mann, Brandt,

Tow, and Green, Vice Presidents of the

Federal Reserve Banks of Boston,

Philadelphia, Cleveland, Atlanta, Kansas

City, and Dallas, respectively

Mr. Deming, Manager, Securities Department,

Federal Reserve Bank of New York

Mr. Kareken, Consultant, Federal Reserve Bank

of Minneapolis

By unanimous vote, the minutes of actions taken at the meeting

of the Federal Open Market Committee held on June 20, 1967, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on June 20, 1967, was accepted.

By unanimous vote, the action of members of the Federal

Open Market Committee on June 29, 1967, approving an amendment to

paragraph 2 of the Committee's Authorization for System Foreign

Currency Operations, effective June 30, 1967, to change the maximum

period authorized for the reciprocal currency arrangement with the

Netherlands Bank from 3 months to 6 months, was ratified.

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By unanimous vote, paragraph 2 of the Authorization for

System Foreign Currency Operations was amended, effective immediately,

to delete therefrom the column headed "Maximum period of arrange

ment (months)" and to incorporate in the text of the paragraph

provision for the Federal Reserve Bank of New York to maintain

reciprocal currency arrangements with specified foreign banks for

periods up to a maximum of 12 months.

By unanimous vote, the System open market transactions in

foreign currencies during the period June 20 through July 17, 1967,

were approved, ratified, and confirmed.

By unanimous vote, increases of $50 million each, from $200

million to $250 million, in the swap arrangements with the Swiss

National Bank and the Bank for International Settlements (System

drawings in Swiss francs) were approved.

By unanimous vote, an increase from $200 million to $300

million in the swap arrangement with the Bank for International

Settlements involving System drawings in authorized European cur

rencies other than Swiss francs was approved.

In consequence of the foregoing actions authorizing increases

in the swap arrangements with the Swiss National Bank and the Bank for

International Settlements, there was also approved by unanimous vote,

effective immediately, the necessary amendment to paragraph 2 of the

Authorization for System Foreign Currency Operations.

With this

7/18/67

and other amendments approved at this meeting, the paragraph read

as follows:

The Federal Open Market Committee directs the

Federal Reserve Bank of New York to maintain reciprocal

currency arrangements ("swap" arrangements) for System

Open Market Account for periods up to a maximum of 12

months with the following foreign banks, which are among

those designated by the Board of Governors of the Federal

Reserve System under Section 214.5 of Regulation N,

Relations with Foreign Banks and Bankers, and with the

approval of the Committee to renew such arrangements on

maturity:

Foreign bank

Austrian National Bank

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of England

Bank of France

German Federal Bank

Bank of Italy

Bank of Japan

Bank of Mexico

Netherlands Bank

Bank of Norway

Bank of Sweden

Swiss National Bank

Bank for International Settlements

System drawings in Swiss francs

System drawings in authorized European

currencies other than Swiss francs

Amount of

arrangement

(millions of

dollars equivalent)

100

150

500

100

1,350

100

400

600

450

130

150

100

100

250

250

300

By unanimous vote, the renewal, on their existing maturity

basis, of the following swap arrangements, which were to mature on

the dates indicated, was approved:

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Foreign bank

Bank of Sweden

Swiss National Bank

Bank for International Settlements

System drawings in Swiss francs

System drawings in authorized European

currencies other than Swiss francs

Austrian National Bank

Bank of Japan

German Federal Bank

Bank of France

Maturity of

latest authorized

renewal

July 19, 1967

July 20, 1967

July 20, 1967

July 20,

July 26,

July 28,

August 9,

August 10,

1967

1967

1967

1967

1967

With Mr. Mitchell dissenting, the Special Manager of the

System Open Market Account was authorized to explore the possibility

of placing all of the System's swap arrangements on a 12-month basis,

with maturities at year end.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period June 20 through July 17, 1967, were approved, ratified, and

confirmed.

With Messrs. Brimmer, Maisel, and Mitchell dissenting, the

Committee decided to omit from the current economic policy directive

to be issued at this meeting the reference to utilization of opera

tions in coupon issues in supplying part of reserve needs that had

appeared in the directives issued at the meetings on May 23 and

June 20, 1967.

By unanimous vote, the Federal Reserve Bank of New York was

authorized and directed, until otherwise directed by the Committee,

7/18/67

to execute transactions in the System Open Market Account in

accordance with the following current economic policy directive:

The economic and financial developments reviewed

at this meeting indicate that economic activity has been

rising modestly and that prospects are for further

expansion. Output is still being retarded by adjustments

of excessive inventories, but growth in final demands

continues strong, reflecting some strengthening in con

sumer expenditures for durable goods and housing, and

also further increases in Government outlays. The over

all indexes of both wholesale and retail prices have

risen further, although wholesale prices of industrial

commodities have remained stable. Bank credit expansion

has been large in recent weeks. Most short- and long-term

interest rates, after reaching advanced levels under the

influence of heavy public and private securities market

financing, have declined somewhat recently. The balance

of payments deficit has remained substantial despite

some improvement in the foreign trade surplus. In this

situation, it is the Federal Open Market Committee's

policy to foster money and credit conditions, including

bank credit growth, conducive to continuing economic

expansion, while recognizing the need for reasonable

price stability for both domestic and balance of

payments purposes.

To implement this policy, while taking account of

forthcoming Treasury financing activity, System open

market operations until the next meeting of the Committee

shall be conducted with a view to maintaining about the

prevailing conditions in the money market; but operations

shall be modified insofar as the Treasury financing permits

to moderate any apparent tendency for bank credit and

money to expand more than currently expected.

It was agreed that the next meeting of the Federal Open Market

Committee would be held on Tuesday, August 15, 1967, at 9:30 a.m.

The meeting adjourned.

Secretary